Cramer says the semiconductor sell-off shows AI chips are undervalued

CNBC’s Jim Cramer critiqued Tuesday’s massive semiconductor sell-off, saying some on Wall Street don’t recognize the lasting importance of advanced graphics chips for artificial intelligence, especially ones from Nvidia.

“There’s a stunning lack of comprehension about how Nvidia and artificial intelligence work,” he said Wednesday. “As long as there are new inventions and new uses for computer power, there will be more need for these chips, and you can attach them to the software no matter what the iteration.”

Semiconductor companies saw their stocks plummet on Tuesday after ASML posted a disappointing quarter a day earlier than expected. The Dutch chip maker lost more than $50 billion in value after the report and dragged down stocks including Advanced Micro Devices, Broadcom and Nvidia. The latter lost more than 6% on the day, but largely recovered and finished Wednesday up a little over 3%.

Cramer pointed out that the one bright spot in ASML’s poor report was its sales of chips related to AI. Big Tech and other major enterprise players will continue to clamor for semiconductors that enable the newest AI technology, he added.

He noted that there are “AI-powered revolutions” just starting in a variety of fields, including health care, manufacturing, cybersecurity and autonomous driving. And according to Cramer, AI is a large part of the reason companies continue to invest heavily in nuclear power.

“I don’t think the need for speed is going away,” he said. “In fact, it’s only gonna increase, especially when tech companies and utilities are furiously trying to put up nuclear power plants to meet the energy demands of Nvidia’s chips.”

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Disclaimer The CNBC Investing Club Charitable Trust holds shares of Nvidia.